Funds seized by ED don’t belong to us, says Paytm parent firm

The statement came after the
ED searched half a dozen offices belonging to online payment gateways such as Razorpay, Paytm and Cashfree in Bengaluru in connection with a probe into the Chinese micro-loan app scandal.

The searches were made under the provisions of the Prevention of Money Laundering Act (PMLA), the federal agency had said on Saturday.

“As part of ongoing investigations on a specific set of merchants, the ED has sought information regarding such merchants to whom we provide payment processing solutions. It is hereby clarified that these merchants are independent entities, and none of them are our group entities,” Paytm said in a statement. “We are, and will continue to, fully cooperate with the authorities, and all the directive actions are being duly complied with.”

The digital payments firm said none of the merchant IDs asked to be frozen by the ED belonged to Paytm or its group entities.

“It may be noted that ED has instructed us to freeze certain amounts from the Merchant IDs (MIDs) of a specific set of merchant entities (as mentioned by the ED in their press release). It may be further noted that none of the funds which have been instructed to be frozen belong to Paytm or any of our group companies,” the Noida-based firm added.

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The ED has launched an investigation on the basis of the 18 First Information Reports (FIRs) registered by the Cyber Crime Police Station, Bengaluru, against numerous entities and individuals.

“During enquiries, it has emerged that these entities are controlled/operated by Chinese individuals,” the ED said, adding it had seized Rs 17 crore “in merchant IDs and bank accounts of these Chinese persons-controlled entities.”

The case refers to predatory lending apps that lured people with apparently easy loans. In some instances, money was paid into customer accounts even without explicit loan applications. This was followed by escalating harassment, including threats to upload morphed photographs to people on contact lists unless repayments were made at usurious rates of interest. The lending and recovery transactions of these lending apps were usually routed through payment gateways.

In February 2021, the ED’s Hyderabad zone had summoned officials of Razorpay, Cashfree and Paytm.

Subsequently, the statements of Razorpay CEO Harshil Mathur, Paytm CFO Vikas Garg and Cashfree CEO Akash Sinha were recorded, sources said.

ET reported on August 24, citing sources, that the ED found proceeds of crime of over Rs 800 crore as part of a long-drawn money laundering probe against 365 fintech firms and their non-banking financial company (NBFC) partners in the Chinese loan-app scandal.

The ED said, during the searches, it found that “the said entities were generating proceeds of crime through various merchant IDs/accounts held with payment gateways/banks and they are also not operating from the addresses given on the MCA website/registered address and having fake addresses.”